DULUTH HOLDINGS INC.

Previous wording

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the financial statements and related notes of Duluth Holdings Inc. included in Item 1of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 (“2023 Form 10-K”).

Current wording

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the financial statements and related notes of Duluth Holdings Inc. included in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended February 2, 2025 (“2024 Form 10-K”).

Previous wording

The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year. Fiscal 2024 is a 53-week period and ends on February 2, 2025. Fiscal 2023 was a 52-week period and ended on January 28, 2024. The three months of fiscal 2024 and fiscal 2023 represent our 13-week periods ended October 27, 2024 and October 29, 2023, respectively.

Current wording

The Company’s fiscal year ends on the Sunday nearest to January 31 of the following year. Fiscal 2025 is a 52-week period and ends on February 1, 2026. Fiscal 2024 was a 53-week period and ended on February 2, 2025. The three months of fiscal 2025 and fiscal 2024 represent our 13-week periods ended May 4, 2025 and April 28, 2024, respectively.

Previous wording

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical or current facts included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “could,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2023 Form 10-K, and other SEC filings, which factors are incorporated by reference herein. These risks and uncertainties include, but are not limited to, thefollowing: the impact of inflation and measures to control inflation on our results of operations; the prolonged effects of economic uncertainties on store and website traffic and disruptions to our distribution network, supply chains and operations; failure to effectively manage inventory levels; our ability to maintain and enhance a strong brand and sub-brand image; adapting to declines in consumer confidence, inflation and decreases in consumer spending; disruptions in our e-commerce platform; effectively adapting to new challenges associated with our expansion into new geographic markets; our ability to meet customer delivery time expectations; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating adequate cash from our existing stores and direct sales to support our growth; the impact of changes in corporate tax regulations and sales tax; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; effectively relying on sources for merchandise located in foreign markets; transportation delays and interruptions, including port congestion; inability to…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. All statements other than statements of historical or current facts included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “could,” “estimate,” “expect,” “project,” “plan,” “potential,” “intend,” “believe,” “may,” “might,” “will,” “objective,” “should,” “would,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenue, costs, expenditures, cash flows, growth rates and financial results, our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including the risks and uncertainties described under Part I, Item 1A “Risk Factors,” in our 2024 Form 10-K, and other SEC filings, which factors are incorporated by reference herein. These risks and uncertainties include, but are not limited to, thefollowing: the impact of inflation and measures to control inflation on our results of operations; the prolonged effects of economic uncertainties on store and website traffic; disruptions to our distribution network, supply chains and operations; failure to effectively manage inventory levels; our ability to maintain and enhance a strong brand and sub-brand image; adapting to declines in consumer confidence, inflation and decreases in consumer spending; disruptions to our e-commerce platform; our ability to meet customer delivery time expectations; our ability to properly allocate inventory throughout our distribution network to fulfill customer demand; our failure to meet our debt covenant ratios; natural disasters, unusually adverse weather conditions, boycotts, prolonged public health crises, epidemics or pandemics and unanticipated events; generating adequate cash from our existing stores and direct sales to support our growth; the impact of changes in corporate tax regulations and sales tax; identifying and responding to new and changing customer preferences; the success of the locations in which our stores are located; effectively relying on sources for merchandise located in foreign markets; transportation delays and in…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

The macroeconomic environment is experiencing inflation, recessionary concerns and general uncertainty regarding the future economic environment and therefore we cannot predict the ultimate impact of these economic conditions on our operational and financial performance. Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand.

Current wording

The macroeconomic environment is experiencing inflation, tariff and recessionary concerns and general uncertainty regarding the future economic environment and therefore we cannot predict the ultimate impact of these economic conditions on our operational and financial performance. Given the uncertainty, we cannot reasonably estimate store traffic patterns and the prolonged impact on overall consumer demand.

Previous wording

Net sales decreased $11.2 million, or 8.1%, to $127.1 million in the three months ended October 27, 2024 compared to $138.2 million in the three months ended October 29, 2023. The decrease in net sales was primarily driven by lower web conversion and a decline in store traffic.

Current wording

Net sales decreased $14.0 million, or 12.0%, to $102.7 million in the three months ended May 4, 2025 compared to $116.7 million in the three months ended April 28, 2024. The decrease in net sales was primarily driven by decline in web traffic due to slower promotional activity.

Previous wording

Gross profit decreased $3.0 million, or 4.3%, to $66.4 million in the three months ended October 27, 2024 compared to $69.4 million in the three months ended October 29, 2023. As a percentage of net sales, gross margin increased to 52.3% of net sales in the three months ended October 27, 2024, compared to 50.2% of net sales in the three months ended October 29, 2023. The increase in gross margin percentage was primarily driven by our sourcing initiatives.

Current wording

Gross profit decreased $8.3 million, or 13.4%, to $53.4 million in the three months ended May 4, 2025 compared to $61.6 million in the three months ended April 28, 2024. As a percentage of net sales, gross margin decreased to 52.0% of net sales in the three months ended May 4, 2025, compared to 52.8% of net sales in the three months ended April 28, 2024. The decrease in gross margin percentage was primarily driven by higher clearance penetration, partially offset by improvement in product costs from our direct to factory sourcing initiative.

Previous wording

Selling, general and administrative expenses increased $1.0 million, or 1.2%, to $82.9 million in the three months ended October 27, 2024 compared to $81.8 million in the three months ended October 29, 2023. Selling, general and administrative expenses as a percentage of net sales increased to 65.2% in the three months ended October 27, 2024, compared to 59.2% in the three months ended October 29, 2023.

Current wording

Selling, general and administrative expenses decreased $4.9 million, or 6.9%, to $65.7 million in the three months ended May 4, 2025 compared to $70.6 million in the three months ended April 28, 2024. Selling, general and administrative expenses as a percentage of net sales increased to 64.0% in the three months ended May 4, 2025, compared to 60.5% in the three months ended April 28, 2024.

Previous wording

The increase in selling, general and administrative expense as a percentage of net sales was mainly driven by increased advertising spend, partially offset by optimization in our outbound shipping network.

Current wording

The increase in selling, general and administrative expense as a percentage of net sales was mainly driven by decrease in net sales, partially offset by a decrease in advertising spend.

Previous wording

Income tax expense was $4.7 million in the three months ended October 27, 2024, compared to income tax benefit of $3.1 million in the three months ended October 29, 2023. The provision for third quarter of fiscal 2024 reflected the establishment of a valuation allowance of $10.1 million established against the net amount of deferred tax assets as well as pre-tax loss in the current year.

Current wording

Income tax expense was $1.3 million in the three months ended May 4, 2025, compared to income tax benefit of $2.1 million in the three months ended April 28, 2024. The provision for first quarter of fiscal 2025 reflected an addition to valuation allowance of $4.1 million which was established against the net amount of deferred tax assets as well as pre-tax loss in the previous fiscal year.

Previous wording

Net loss attributable to controlling interest was $28.5 million, in the three months ended October 27, 2024 compared to net loss of $10.5 million in the three months ended October 29, 2023. In addition to the factors addressed above, $6.2 million in restructuring expense contributed to the net loss in the current period.

Current wording

Net loss attributable to controlling interest was $15.3 million, in the three months ended May 4, 2025 compared to net loss of $7.9 million in the three months ended April 28, 2024.

Previous wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $5.2 million to ($6.8) million in the three months ended October 27, 2024 compared to ($1.6) million in the three months ended October 29, 2023. As a percentage of net sales, Adjusted EBITDA decreased to (5.3%) of net sales in the three months October 27, 2024 compared to (1.1%) of net sales in the three months ended October 29, 2023.

Current wording

As a result of the factors discussed above in the “Results of Operations” section, Adjusted EBITDA decreased $5.6 million to ($3.8) million in the three months ended May 4, 2025 compared to $1.8 million in the three months ended April 28, 2024. As a percentage of net sales, Adjusted EBITDA decreased to (3.7%) of net sales in the three months May 4, 2025 compared to 1.6% of net sales in the three months ended April 28, 2024.

Previous wording

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At October 27, 2024, our net working capital was $60.6 million, including $9.3 million of cash and cash equivalents.

Current wording

Our business relies on cash from operating activities and a credit facility as our primary sources of liquidity. Our primary cash needs have been for inventory, marketing and advertising, payroll, store leases, and capital expenditures associated with infrastructure and information technology. The most significant components of our working capital are cash, inventory, accounts payable and other current liabilities. At May 4, 2025, our net working capital was $54.2 million, including $8.6 million of cash and cash equivalents.

Previous wording

We expect to spend approximately $23.0 million in fiscal 2024 on capital expenditures, inclusive of software hosting implementation costs, primarily due to investments in logistics optimization, including investments in the fulfillment network and information technology. Due to the seasonality of our business, a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

Current wording

We expect to spend approximately $17.0 million in fiscal 2025 on capital expenditures, inclusive of software hosting implementation costs, primarily due to investments in logistics optimization, including investments in the fulfillment network and information technology. Due to the seasonality of our business, the fourth quarter typically has the most significant impact on our amount of cash from operating activities. We also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year.

Previous wording

Operating activities consist primarily of net income adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in operating assets and liabilities.

Current wording

Operating activities consist primarily of net loss adjusted for non-cash items that include depreciation and amortization, stock-based compensation and the effect of changes in operating assets and liabilities.

Previous wording

For the nine months ended October 27, 2024, net cash used in operating activities was $58.1 million, which primarily consisted of cash used in operating assets and liabilities of $47.3 million and a $40.1 million net loss for the nine months ended October 27, 2024 partially offset by depreciation of $24.7 million. The cash used in operating assets and liabilities of $47.3 million was primarily due to a $105.7 million increase in inventory, partially offset by a $53.2 million increase in trade accounts payable.

Current wording

For the three months ended May 4, 2025, net cash used in operating activities was $56.5 million, which primarily consisted of cash used in operating assets and liabilities of $50.3 million and a $15.3 million net loss for the three months ended May 4, 2025 partially offset by depreciation of $6.7 million. The cash used in operating assets and liabilities of $50.3 million was primarily due to a $28.2 million decrease in accounts payable and $9.6 million increase in inventory.

Previous wording

For the nine months ended October 29, 2023, net cash used in operating activities was $31.0 million, which primarily consisted of cash used in operating assets and liabilities of $36.6 million and a $16.4 million net loss for the nine months ended October 29, 2023 partially offset by depreciation of $23.4 million. The cash used in operating assets and liabilities of $36.6 million was primarily due to a $19.0 million increase in inventory and $10.2 million decrease in trade accounts payable.

Current wording

For the three months ended April 28, 2024, net cash used in operating activities was $33.7 million, which primarily consisted of cash used in operating assets and liabilities of $33.2 million and a $7.9 million net loss for the three months ended April 28, 2024 partially offset by depreciation of $8.3 million. The cash used in operating assets and liabilities of $33.2 million was primarily due to a $10.7 million increase in inventory and $13.2 million decrease in trade accounts payable.

Previous wording

Investing activities consist primarily of capital expenditures for growth related to investments in infrastructure and information technology.

Current wording

Investing activities consist primarily of capital expenditures related to investments in infrastructure and information technology.

Previous wording

For the nine months ended October 27, 2024 and October 29, 2023, net cash used in investing activities was $5.7 million and $39.8 million, respectively.

Current wording

For the three months ended May 4, 2025 and April 28, 2024, net cash used in investing activities was $1.3 million and $1.5 million, respectively.